Rumored Dell purchase of AMD? Not likely

Again with the AMD buyout rumors. They make as much sense this time around as …

Like the tides, the AMD buyout rumor returned yesterday, this time with Dell as the alleged buyer. And yet again, the stock market dutifully responded by moving share prices around as the speculators who started and stoked the rumor no doubt took their gains. There are so many problems with this rumor whenever it arises, but the two main issues are (a) it's hard to see a good rationale for any other tech player to buy AMD, and (b) Intel wants to make sure that AMD stays independent and viable (although not too viable).

What sparked the buyout rumors this time was a train of high-level executive exits at AMD, starting with CEO Dirk Meyer's departure last month. COO Robert Rivet and SVP of Corporate Strategy Marty Seyer announced last week that they'd be following Meyer out the door, prompting speculation about what, exactly, is going on at the chipmaker. A string of high-profile exits is always a bad sign, but it doesn't have to mean that it's sale time.

One possible factor behind the exits could be the board dissatisfaction fingered in the case of Meyer. Of course, in the past six months, AMD's stock has posted a healthy 35 percent gain—compare it to Intel's 11 percent jump despite a string of record quarters. So what could AMD shareholders possibly be cranky about? NVIDIA is one possible answer.

NVIDIA is up over 150 percent in the past six months—a terrific run that parallels ARM's similar blast-off in this same timeframe. Jen-Hsuan's gamble with the launch of the Tegra line has paid off big time, and NVIDIA is reaping the rewards of the entire tech market's current infatuation with ARM. Meanwhile, as we pointed out in our coverage of Meyer's departure, AMD's answer to Tegra was the Imageon line—a great chip with a head-start against Tegra that AMD unfortunately sold to Qualcomm in order to keep itself afloat.

But ultimately, it's pointless to speculate about AMD's executive departures until we get more details. The fact that AMD blew its ARM opportunity while NVIDIA is blowing up could be a factor, but it could also come down to internal politics. Who knows.

What is clear is that while the departures amount to a shake-up, the sale thesis is still very weak.

x86 is not ARM

The idea that a larger x86 systems integrator like Dell might buy AMD to give it an edge is the kind of notion that could only have gotten any traction in the wake of ARM's rise. The pundits and analysts who propose such things are probably now seeing the x86 market through the distorting lens of the ARM ecosystem, and that's a mistake.

It's expensive to have your own in-house chip design team, so if you're going to do it then it had better make a whole lot of sense. In the case of the commodified ARM ecosystem, an in-house team that either tweaks the standard-issue ARM designs or does a new implementation from the ground up can enable an Apple or a Qualcomm to differentiate itself from a crowded field of competitors making mostly similar products from mostly identical microprocessor cores.

Contrast this to the x86 market, which isn't an "ecosystem" but is rather a single, giant integrated device manufacturer (Intel) and a much smaller, IP-only rival (AMD... and no, VIA isn't big enough to matter here). Given this dynamic, it's not at all clear why an x86 systems integrator would want to own its own in-house chip design team. Why not let AMD and Intel duke it out, and then pick from the best of each product cycle? Why take on all the risk of doing CPU and/or GPU design in competition with Intel? What business problem does this solve for anyone?

In other words, the decision to do ARM design in-house is a decision to try to differentiate yourself a bit from a crowded ecosystem; the decision to do x86 design in-house is a decision to compete with Intel on design and manufacturing prowess. The former makes sense, while the latter is a good way to earn yourself a really long string of money-losing quarters.

Finally, the Intel monopoly factor weighs against a sale of AMD.

As one pundit has sensibly pointed out, the purchase of AMD would amount to a declaration of war with Intel. Certainly the numerous patent cross-license agreements between the two rivals would come up for renegotiation in the event of a sale, but that licensing arrangement is not itself why Intel would oppose an AMD buy-out—rather, the threat of ending the cross-licensing pact is just the leverage that Intel would use to ensure that such a buy-out doesn't happen.

It's conventional wisdom at this point that Intel needs a viable, independent AMD in order to stay out of antitrust trouble in the US and Europe. And for once, conventional wisdom is probably right. If a Dell or an Apple were to buy AMD and then stop selling AMD chips to rival OEMs, Intel would be the only real x86 supplier left standing (again, ignoring VIA, which is absolutely minuscule). The moment a larger systems integrator announces a bid for AMD, Intel will have a talk with it and explain that if it purchases the chipmaker, then it will soon lose access to the x86 patents, in which case the GPU IP is all that will be left for them to develop. So unless the plan is to pair AMD's GPUs with an ARM core and use the resulting SoC to gain an edge in the ARM market, there seems to be no reason to buy the chipmaker.

So an AMD acquisition by the likes of Dell—or any other PC systems integrator—not only makes no sense, but Intel would surely never permit it to happen.

This isn't to say that AMD won't be purchased—some private equity group could buy it for whatever reason. Or, as I suggested above, if AMD becomes really cheap it might make sense for an ARM shop to buy them and then do an ARM CPU + ATI GPU fusion of the type that NVIDIA is working on with its Project Denver. But as a strategic acquisition that gives an x86 customer some sort of advantage over the rest of the x86 field (i.e., Intel's customers), it makes zero sense.

(a) it's hard to see a good rationale for any other tech player to buy AMD

I completely agree, it is extremely difficult to spin it so Dell acquiring AMD would be a gain for Dell. And that does not even consider the possibility of Intel spiking such a deal.

On the other hand, I have seen some pretty large mergers/acquisitions over time that I felt did not have a good rationale (many of them ran aground or at least never yielded anything like the promised gains). So you cannot completely rule out stupidity in the boardrooms.

But thanks for keeping us up on the rumor mill. And nicely summing up why the rumor is most likely a load of BS.

Had to laugh when I saw this, because the HP / Compaq merger is one of those that I was thinking about when I mentioned seeing big mergers that did not make sense. And it made more sense than Dell buying out AMD.

I don't believe AMD's shares have risen at such a great rate simply due to buyout rumors. I think investors see it as a safe bet whether the company is bought out or not.

If the company is bought out (not likely) the investor wins.

AMD was at a very low price, and that's a great time to buy. The future viability of AMD is very promising. Even though they may have seemingly missed the handheld train, they do have a number of advantages in the x86 SOC front. If Intel can get enough people excited about handheld x86, that would be great for AMD. They could easily make a better low-end x86 SOC due to their graphics capabilities. And THAT was the iffy part!

AMD is going to have its shot this year when they release their SOCs for desktops and laptops, and I think they'll have a winner. Intel just doesn't have mature or capable enough graphics components to develop a viable x86 SOC. Intel cannot replace the need for a discrete graphics card, while AMD can. AMD can make a SOC that can rival a system with a discrete card. With the Intel/NVIDIA licensing issues for integrated graphics, I wouldn't be surprised if Apple started using AMD SOCS. They are an AMD customer already anyways. And Intel isn't technically allowed to punish vendors for using AMD CPUs anymore. Maybe Intel and NVIDIA will even set aside their differences to get back into the mainstream market.

I believe AMD's opportunity to shine once again is coming in the next 12 months. The age of the SOC is here and AMD has some definite advantages on that front.

I hadn't heard about Imageon though... that's pretty interesting. Maybe that's why they ousted Dirk. Did the sale include a no-compete agreement, or can AMD get back into the ARM business? I know Global Foundaries has some pretty nice ARM fabrication processes.

Yea, AMD buyout rumors are par for the course. A few years ago some uninformed people were saying that nVidia would buy AMD. Heh... The problem any entity would have with buying AMD is, after the purchase, what then? Only AMD has the experience of going head to head with Intel and winning a few rounds, and only AMD, it seems to me, is capable of running AMD...

You might want to brush up on the FTC/Intel settlement (specifically part III-B) before you become too bold in your proclamations of what Intel would do should an OEM attempt to buy AMD. Intel has several restrictions/requirements regarding a potential change in control of AMD. If Intel notified a potential buyer that they would never get patents as soon as a purchase was announced they would be in serious violation of the FTC agreement and I would expect that the FTC would come down on them like a ton of bricks.

Furthermore Intel is as dependent on a license from AMD as AMD is from Intel. Or have your forgotten that Intel copied AMD64 lock stock and barrel? The old cross license agreement between Intel and AMD was very one-sided but between the new cross license and the FTC settlement Intel has to tread much more lightly.

I think the only company with enough clout and madness to buy AMD is Apple. So what if Intel revokes the cross-patents? Apple can bring market pressure to the table - and threaten to leave x86 if Intel acts petulantly.

Apple buys AMD, declares war on Intel, and differentiates from a sea of wanna be laptops and computing devices. And then it emerges as the one true tech mega-corp.

Apple will be the most awesome company in the world if they buy AMD AND sell the products for lower price.

Apple already has literally shit load of money.Apple already integrates tablets, phones, notebooks, desktops, etc...Apple already has software for all of these...Apple already is working on fully developing their own ARM CPUsNow, if Apple also buys AMD, they get their own x86 CPUs, and some kick-ass GPUs.

Apple will be the most awesome company in the world if they buy AMD AND sell the products for lower price.

Apple already has literally shit load of money.Apple already integrates tablets, phones, notebooks, desktops, etc...Apple already has software for all of these...Apple already is working on fully developing their own ARM CPUsNow, if Apple also buys AMD, they get their own x86 CPUs, and some kick-ass GPUs.

You forgot one entry from your list:

Apple already is involved in patent litigation left right and centre without wading head-first into a sure-fire battle with Intel over an issue that they will lose.

As someone said, the only possible parties to buyout AMD, is either a private equity group, or some Asian (read: Chinese or possibly Indian) giant who has such a large market pretty much to themselves that they don't need to worry about Intel.

Dell purchasing AMD would be the worst thing to happen to AMD. I found this rumor quite surprising. I do like the idea that perhaps someone will light a fire under AMD's butt and get them moving. They've been stagnating again and not competing with Intel as hard as I'd like. However, given my extreme dislike of Dell based on the ownership experience of an XPS laptop I have no doubt that Dell ownership would completely eliminate any quality control on AMD products. I'm also not so sure Dell could get their business right-side up after separating from Intel and all their anti-competitive kickbacks.

Would it be better if another company bought AMD? That depends. I don't want to see Apple do it because then we'd never see an AMD device outside of Apple products. I don't want Microsoft to do it because then they'd sneak in all sorts of Windows-only features. A purchase by Google, Cisco, or Samsung would certainly shake up the processor market. I'd rather see AMD stay independent, but they need to compete more aggressively. They completely failed to take advantage of Intel's cougar point blunder.

What if, by 2015, Intel loses interest in x86 and does not have a variety of CPU variations that satisfies Apple's needs. Intel finds out that only emerging markets will buy their PCs and has CPUs addressing those markets only. This can be a disaster for Apple and putting them in the same 'deja vu' position again (Previously with IBM for PowerPCs and now Intel with x86).

Apple will be the most awesome company in the world if they buy AMD AND sell the products for lower price.

Apple already has literally shit load of money.Apple already integrates tablets, phones, notebooks, desktops, etc...Apple already has software for all of these...Apple already is working on fully developing their own ARM CPUsNow, if Apple also buys AMD, they get their own x86 CPUs, and some kick-ass GPUs.

WOW. I will turn to complete Apple fan if they do that.

Problem is that Apple is going to need every cent to survive the next ten years... Their problem isn't just that Steve Jobs won't be around forever, and there really isn't a suitable replacement, but as much that the competition isn't that far behind in software and some steps ahead in hardware in their main market(the devices using iOS).

Especially HP and their plans for WebOS are going to hurt Apple in the coming years. HP WebOS is at least at the same level of usability and the multitasking solution is good enough that it is the clear inspiration behind both Android and Blackberrys tablet OS offerings(I wonder if there is a patent on the card metaphor). When the user-base and number of applications start to grow there is no doubt HP can take Apples place on several markets.

On the x86 arena Apple have similar problems. The PC makers match or beat them in hardware, some even when it comes to the traditional strong point of notebook battery time, and Windows 7(plus a financial crisis) makes OS/X a hard sell in most of the cooperate world. That the next OS/X Lion, coming this summer, will be more iOS like won't help with the serious business although it would make it a great kids OS. Besides OS/X isn't the only new PC operative system to arrive in 2011, rumors has it that we also will see Windows 8, Chrome OS and WebOS on PCs during the year.

In other words, I don't want Apple to kill another great CPU design firm.

Problem is that Apple is going to need every cent to survive the next ten years... Their problem isn't just that Steve Jobs won't be around forever, and there really isn't a suitable replacement, but as much that the competition isn't that far behind in software and some steps ahead in hardware in their main market(the devices using iOS).

Considering exactly how much the stock price climbed while Tim Cook was handling the company during Steve's absence last time, I think that a)it's pretty clear who is next in line and b) that Apple will be ok. Especially considering that people who know Cook say he is very similar to Jobs.

JustJC wrote:

That the next OS/X Lion, coming this summer, will be more iOS like won't help with the serious business although it would make it a great kids OS. Besides OS/X isn't the only new PC operative system to arrive in 2011, rumors has it that we also will see Windows 8, Chrome OS and WebOS on PCs during the year.

Actually most talk says Windows 8 will be 2012 or later. Check this link: http://www.tomshardware.com/news/Window ... 12045.html Nice ridiculous dig at OSX BTW. People use iOS for a lot more than kids stuff, so your implication that adding iOS features to OSX makes it kiddified is really stupid.

Here it is. three quarters of the way down the agreement it talks about what is allowed if there is a "Change of Control" at AMD by being bought out or otherwise taken control of by another entity.

Essentially what it says is that if AMD is bought out or merges with another company, the agreement ceases to exist for all AMD processor designs from the day of the sale and intel gets what patients amd brought to the table.

So the x86 part of amd would be useless to the purchasing company. Now for the arm side of this debate why buy a x86 chip design firm to make arm cpu's. all of amd's x86 knowledge would be completely useless to make an arm cpu.

Face reality people amd is not going to be purchased by anyone if it was that easy to purchase a firm that had an x86 license via would of been picked up ages ago and Cyrix would still exist...

Both parties have patents that the other uses extensively (for ex: intel uses amd64).

I believe the cross licensing agreement will cease to exist means whoever acquires amd may need to renegotiate with intel so that both entities can keep producing x86 processors.

That said, I feel the rumours are baseless. Just some wall street types drumming up the stock price so that they can sell.

Maxius wrote:

http://download.intel.com/pressroom/..._agreement.pdf

Here it is. three quarters of the way down the agreement it talks about what is allowed if there is a "Change of Control" at AMD by being bought out or otherwise taken control of by another entity.

Essentially what it says is that if AMD is bought out or merges with another company, the agreement ceases to exist for all AMD processor designs from the day of the sale and intel gets what patients amd brought to the table.

So the x86 part of amd would be useless to the purchasing company. Now for the arm side of this debate why buy a x86 chip design firm to make arm cpu's. all of amd's x86 knowledge would be completely useless to make an arm cpu.

Face reality people amd is not going to be purchased by anyone if it was that easy to purchase a firm that had an x86 license via would of been picked up ages ago and Cyrix would still exist...

Both parties have patents that the other uses extensively (for ex: intel uses amd64).

I believe the cross licensing agreement will cease to exist means whoever acquires amd may need to renegotiate with intel so that both entities can keep producing x86 processors.

That said, I feel the rumours are baseless. Just some wall street types drumming up the stock price so that they can sell.

Maxius wrote:

http://download.intel.com/pressroom/..._agreement.pdf

Here it is. three quarters of the way down the agreement it talks about what is allowed if there is a "Change of Control" at AMD by being bought out or otherwise taken control of by another entity.

Essentially what it says is that if AMD is bought out or merges with another company, the agreement ceases to exist for all AMD processor designs from the day of the sale and intel gets what patients amd brought to the table.

So the x86 part of amd would be useless to the purchasing company. Now for the arm side of this debate why buy a x86 chip design firm to make arm cpu's. all of amd's x86 knowledge would be completely useless to make an arm cpu.

Face reality people amd is not going to be purchased by anyone if it was that easy to purchase a firm that had an x86 license via would of been picked up ages ago and Cyrix would still exist...

oh i agree but from what i have read amd loosing its license does not negate any license intel has for lets just say amd64. if amd violated the terms of the x86 license intel is not in anyway hurt its worded in such a way to make sure intel does not get the short end of the stick intel can continue to make processors that use amd's patients

Maxius your link is broken so I cannot be sure but... what you are describing sounds like the old (2000) agreement where a change in control was a breach of contract. The current agreement does not have a breach penalty where a change in control means Intel gets everything. Furthermore Intel has a settlement with the FTC that has further cross licensing negotiation requirements in the event that AMD undergoes a change in control. Basically what txguy said is spot-on.

I like the image! I think Sanders would be proud of the characterization. Sanders is a trip--AMD needs him, and it wouldn't surprise me at all to learn he has always been lurking in the shadows, whispering suggestions to the current AMD hierachy. Whether they have listened entirely is another subject...

The more insane the rumor, the more likely it is to be true where AMD is concerned (people thought they were insane when they purchased ATi and when they sold off their Snapdragon ARM SoC for a song).

I look at AMD now and with every passing day the parallels between what is happening there and what happened to Commodore years ago just keep getting stronger and stronger.

I could not disagree more...and I lived, breathed, and ate nothing but Amigas from 1986-1993... C= never really or truly understood what it had in the Amiga--it blew the Mac out of the water in most every respect--for example, Amigas were preemptively multitasking in 512k of ram when Macs were single-tasking/cooperatively multitasking dinosaurs, were displaying 4096 colors on screen at 24 fps + when Macs were black and white and "animation" was a word Apple did not yet know how to spell. Lets not even talk about about sound. Let's not talk about price, and let's not talk about many other things, including games (I recall a time when the only screenshots portrayed on a game box--the brand of computer did not matter--were exclusively Amiga screen shots.)

What gutted C= was very simply a crisis of management--management that did not know what it had. It seems to me that AMD is altogether different, and that AMD knows *exactly* what markets to play in and how. Amd has already burst Intel's bubble over a period of *years*, and that is a feat no other x86 cpu maker has managed. Indeed, as some other folks have pointed out, without an x86-64 cross-licensing agreement with AMD, Core 2 and it successors would not exist. AMD's level of success has far and away exceeded anything C= ever dreamed of, and that is precisely because AMD knows exactly what it has and what it's doing.

Parenthetically, , I am trying out IE9 RC1 with this post--deviating from FF 4.0 b11--and does anyone know why it still doesn't include a spell checker? Do I still have to have a Word dictionary installed, or a specific add-on? Any info would be appreciated.

Edit: found iespell--nowhere near as nice as FF's speller. In a word--iespell sucks. Had to edit this post to correct the mistakes it wrote when supposedly "correcting" my spelling. Terrible.

I like the image! I think Sanders would be proud of the characterization. Sanders is a trip--AMD needs him, and it wouldn't surprise me at all to learn he has always been lurking in the shadows, whispering suggestions to the current AMD hierachy. Whether they have listened entirely is another subject...

There *are* rumors that AMD's board is trying to coo Sanders to come back to 'his company'...

Whoa. If the rumor is right... we might see Episode 2 of "IT Stalwart Making A Comeback". (Episode 1 was Steve Jobs).

The more insane the rumor, the more likely it is to be true where AMD is concerned (people thought they were insane when they purchased ATi and when they sold off their Snapdragon ARM SoC for a song).

I look at AMD now and with every passing day the parallels between what is happening there and what happened to Commodore years ago just keep getting stronger and stronger.

I could not disagree more...and I lived, breathed, and ate nothing but Amigas from 1986-1993... C= never really or truly understood what it had in the Amiga

What gutted C= was very simply a crisis of management--management that did not know what it had. It seems to me that AMD is altogether different, and that AMD knows *exactly* what markets to play in and how. Amd has already burst Intel's bubble over a period of *years*, and that is a feat no other x86 cpu maker has managed. Indeed, as some other folks have pointed out, without an x86-64 cross-licensing agreement with AMD, Core 2 and it successors would not exist. AMD's level of success has far and away exceeded anything C= ever dreamed of, and that is precisely because AMD knows exactly what it has and what it's doing.

Parenthetically, , I am trying out IE9 RC1 with this post--deviating from FF 4.0 b11--and does anyone know why it still doesn't include a spell checker? Do I still have to have a Word dictionary installed, or a specific add-on? Any info would be appreciated.

Well I was with C= from 1983 to 1994, started on the C=64. I think the current situation is very Commodore like. The Irving Gould's and Abdul Mehdi's of AMD have taken over and tossed out management because they don't like the direction the company was headed and are only interested in trying to grow the company larger (the better to line their pockets). Gould did the same with Tramiel and virtually every CEO after that. Gould knew nothing about how to run a computer company properly and destroyed Commodore with able assistance from Mehdi. AMD's current board of directors are doing an excellent job of emulating Gould and Mehdi, and AMD hasn't had a credible CEO since Sanders departed.